Will Bessent's '3-3-3' strategy tame the U.S. budget deficit?
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WILL BESSENT'S '3-3-3' STRATEGY TAME THE U.S. BUDGET DEFICIT?
Bond and stock markets were buoyed by the nomination of Scott Bessent as U.S. Treasury Secretary on Monday. Now the key will be whether he will be able to achieve his "3-3-3" strategy if his nomination is confirmed.
Bessent is an advocate for lowering the deficit and has stated that the United States is running out of time to grow out its rapidly expanding debt. His plan to put the economy back on track involves a three-pronged approach including gross domestic product growth of 3%, a 3% budget deficit and producing an additional 3 million barrels of oil a day.
Whether he can achieve this "time will tell, but for now, he has changed the market mood, if nothing else," Societe Generale's chief FX strategist Kit Juckes said in a report.
Meanwhile Bessent is expected to pursue a more gradual implementation of tariffs, which has eased some concerns that the policy will send inflation sharply higher.
"Bessent's measured approach, emphasizing economic stability and a gradual rollout of tariffs, has eased investor concerns. This moderation contributed to a decline in long-term Treasury yields, which slowed the near-term appreciation of the dollar," said Marc Chandler, chief market strategist at Bannockburn Global Forex, in a note.
Dollar bulls will also be cheered that Bessent doesn't share the views of Trump and Robert Lighthizer on the benefits of a soft currency. Lighthizer is seen as having a potential role in the Trump administration as a "trade czar."
"In past interviews, Bessent noted 'the reserve currency can go up and down based on the market. I believe that if you have good economic policies, you're naturally going to have a strong dollar.' We concur and are very relieved that Lighthizer's plans to weaken the dollar have fallen by the wayside," wrote Brown Brothers Harriman FX analysts led by Win Thin, in a note.
(Karen Brettell)
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